Question

BLANK Corp. factors $440,000 of accounts receivable with BLANK Finance Corporation on a without recourse basis on July 1, 2017. The receivables records are transferred to BLANK Finance, which will receive the collections. BLANK Finance assesses a finance charge of 1.90% of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable to cover sales discounts, returns, and allowances. The transaction is to be recorded as a sale.

Prepare the journal entry on July 1, 2017, for BLANK Corp. to record the sale of receivables without recourse. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit July 1, 2017 Prepare the journal entry on July 1, 2017, for BLNAK Finance Corporation to record the purchase of receivables without recourse. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit July 1, 2017

Answer 1

Pass journal entry in the books of Blank Corp. as follows:

Amount Date Particulars 01-Jul Cash Due from factor (1.90%*440000) Loss on sale of receivables (6%*440000) Accounts Receivable A/C (Being factoring of accounts receivable to Blank finance) Amount $405,240 $26,400 $8,360 $440,000

Pass journal entry in the books of Blank Finance as follows:

Amount Amount $440,000 Date Particulars 01-Jul Accounts Receivable A/C Cash Due to Blank corp. (1.90%*440000) Financing revenue (6%*440000) (Being accounts receivable purchased from Blank Corp.) $405,240 $26,400 $8,360